Cold comfort for managers as confidence collapses

Today, the majority of managers are hoping that the Monetary Policy Committee will freeze rates at 4 per cent for the start of 2003, as business confidence levels virtually halve and perceived job security falls back to the levels last experienced in 1996.

According to the latest Quarterly Management Trends published today by the Chartered Management Institute1, a clear majority of managers (61 per cent) want interest rates to stay the same. Yet the continuing global economic uncertainty and prospect of war, has seen increasing numbers - now 25 per cent of managers – calling for a reduction in rates.

Over the past quarter, the Business Confidence Indicator2 has dropped dramatically from 39 per cent to 23 per cent, reflecting the gloomy national picture.

The survey shows a continuing decrease in both demand and output since the September 2002 survey, but this quarter has also seen falling performance expectations for the next quarter. This has resulted in many organisations putting their future investment plans on ice. There has been a marked decrease in planned investment across all areas of expenditure from plant and machinery, information and communications technology, research and development, to employee training and marketing.

There may be some basis for reported fears of ‘stagflation’ (ie low growth and rising inflation), as against this backdrop of falling demand and output managers are also expecting a rise in the amount they pay and charge for goods and services. A net 34 per cent are anticipating an increase in the amount they pay for goods and services this quarter, in contrast to 25 per cent in September. A net 16 per cent are expecting an increase in the amount they charge this quarter, by contrast with 11 per cent in September.

Yet are young managers hardier in the current climate ?

A complementary survey3 carried out at the end of 2002 among a targeted audience of young managers, revealed the optimism of youth in their markedly more bullish hopes for 2003. In total, a net 39 per cent of younger managers were optimistic about their organisation’s business prospects, in contrast to only 21 per cent of managers in general.

Over half of younger managers still forecast growth in the service sector, whereas only 11 per cent predicted increases in the manufacturing sector. They also expected the UK’s relatively high levels of employment to fall in 2003, but not by a great margin. Thirty three per cent anticipate falling employment levels as opposed to 16 per cent who expect employment to rise; the majority consider that levels will remain static.

Looking forward at prospects and priorities for the New Year, the survey of younger managers also identified key priorities for Government. The top three priorities were: increased investment in public services (53 per cent); tax incentives to increase training uptake (50 per cent) and tax cuts for business (47 per cent).

Despite the perceived need for increased investment in the public sector, there is still a clear need for improved management and leadership, as a net 7 per cent of managers believe that public sector efficiency will decrease over the next 12 months.

Christine Hayhurst, Director, Public and Professional Affairs of the Chartered Management Institute said: "The survey reflects how managers as a whole are increasingly nervous against the current external economic backdrop. Job security is beginning to become a key concern for many and it is important that further investment in employee training is encouraged so that employees have the transferable skills necessary to cope with the current climate of change and uncertainty and to boost the performance of the public sector."


Alison Agmen-Smith / Sally Lingard
Chartered Management Institute Press Office
Tel: 020 7497 0496; outside office hours: 020 8948 3256

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